Misappropriation of Trade Secrets

• Pages: 183-197

CHAPTER VII

MISAPPROPRIATION OF TRADE SECRETS

The alleged misappropriation by one competitor of the

trade secrets of another frequently gives rise to combined

antitrust/business tort litigation. As demonstrated in Chapter

1, although antitrust claims may arise out of predatory or

exclusionary conduct, mere proof of tortious conduct, standing

alone, is insufficient to establish an antitrust claim.

Nonetheless, proof of such conduct may be strong evidence of

predatory intent, and may support punitive damages awards

greatly in excess of the statutory treble damages allowed under

the antitrust laws. This chapter addresses the

misappropriation of confidential business information, or trade

secrets, by one competitor from another. – Eds.

A. Introduction

State trade secret law is invoked to redress the misappropriation of

confidential business information that, although not patentable,

nonetheless qualifies for trade secret protection. The discussion that

follows examines the principles generally applicable to claims of trade

secret misappropriation as reflected in the Restatement (Third) of Unfair

Competition, the Uniform Trade Secrets Act and similar state statutes.1

B. Purposes of Trade Secret Protection

As the Supreme Court has acknowledged, “[t]he maintenance of

standards of commercial ethics and the encouragement of invention are

1. For a list of states that have adopted the Uniform Trade Secrets Act or a

similar statute, see RESTATEMENT (THIRD)OF UNFAIR COMPETITION § 39,

statutory note (1993) [hereinafter RESTATEMENT]; see also MILGRAM ON

TRADE SECRETS (1991). Misappropriation of trade secrets also may give

rise to criminal liability under state and federal statutes; see, e.g., TEX.

PENAL CODE ANN. § 31.05(b) (Vernon 1994); 18 U.S.C. §§ 1341, 1343

(mail and wire fraud); National Stolen Property Act, 18 U.S.C. § 2314.